ICU Research: Liquidity at 5-month low

As of Friday morning, banking sector liquidity hit UAH96.62bn, down UAH0.3bn from the previous day. This time, the main driver of the decline was the cash outflow instead of Treasury operations, which did the inverse. Total CDs outstanding declined from the banks' side in 14-day instruments with funds reallocated to ON CDs along with funds at accounts with the NBU.

Banks decreased investments in 14-day CDs by UAH2.97bn while ON CDs rose by UAH1.05bn. Banks' correspondent accounts with the NBU rose UAH1.62bn while CDs outstanding decreased UAH1.92bn. The reallocation from 14-day CDs to ON instruments and banks accounts happens every time the NBU board meets and 14-day CDs are not offered. There was a cash outflow of UAH0.46bn which was offset by Treasury operations of UAH0.17bn, resulting in a UAH0.3bn decrease in liquidity caused by autonomous non-monetary operations.

Investment implications: Liquidity has hit a 5-month low. Despite the positive influence of the Treasury on liquidity's volume, its insufficiency led to its decreasing for the seventh day. There was a reallocation of funds from 14-day instruments because on the day of the NBU board's meeting the NBU do not sell 14-day CDs as well as of increasing funds at accounts with the NBU. It is likely that investments in 14-day instruments will increase on Friday.